The relationship between President Donald Trump and Fed Chairman Jerome Powell has been a contentious one in recent months. Trump continues to insist that the economy is in need of stimulative monetary policy from the Federal Reserve. He further blames the Fed for market volatility.
With economic growth tapering a bit, economists and the market have increasingly priced in the odds of another two rate cuts, 25 basis points each. Thought nothing is for certain. Meanwhile, Trump has been calling for 100 basis points worth of cuts.
“I actually think Trump is trying to yell and scream for a percentage point in the hopes that they'll do 50 instead of 25 basis points,” Optimal Capital’s Frances Newton Stacy, tells Yahoo Finance’s YFi AM.
Either way, monetary policy stimulus may only delay the inevitable.
”There’s always going to be another recession, it’s just when,” Stacy says. “If we have problems in the credit market, let’s say we have massive defaults and corporate bonds, student loans and subprime auto, some of the sensitive areas, some of the covenant light areas of the market, I see a recession.”
Investors are obviously spooked about the thoughts of a possible recession. Proof of that is volatility (VIX) spiking in the markets. And President Trump’s answer is to call out Jerome Powell and the Fed directly through his twitter account.
“Doing great with China and other Trade Deals. The only problem we have is Jay Powell and the Fed. He’s like a golfer who can’t putt, has no touch. Big U.S. growth if he does the right thing, BIG CUT - but don’t count on him! So far he has called it wrong, and only let us down....”
“He’s king of trying to bait them into lowering rates I think, rather than elicit cooperation,” Newton Stacy says.